Bad Credit: Why It Doesn’t Always Mean The Lending Door Is Closed

When consumers are feeling the pinch, there are a number of steps they can take in order to get a better handle on their finances. This could include anything from assessing whether their incomings and outgoings are matching up to making the shift from spender to saver.

However, while consumers may be taking a number of steps to ensure that they stay on budget from month to month, the latest figures from the Bank of England have shown that they are still relying on credit in order to stay afloat. Consumer credit increased by £0.6 billion at the end of last year, as UK households looked to loans, credit cards and more to help meet their everyday and ongoing costs.

With such a reliance on credit, those with a bad credit history may lose all hope when it comes to their borrowing needs. Despite traditional lenders tightening their lending criteria, bad credit doesn’t need to mean the end of the road for those with a less than perfect financial history.

Repair your credit score

Most lenders will turn your credit score to ascertain whether you will be a high or low-risk borrower. While failing to make repayments on time and making a number of credit cards applications can act to damage your credit score there a number of steps you can take to repair it. This can include something as simple as registering on the electoral roll to rectifying any mistakes on your file. Advisors from the three main credit agencies, Experian, Equifax, Call-Credit, are normally on hand to offer you advice on how to improve your credit score, so you don’t need to go through the process alone.

Seeking out advice

Organization such as the government-backed Money Advice Service offer a wealth of impartial financial advice, and are a great resource to turn to if you are having difficulty borrowing because of a bad credit history. Citizen’s Advice will also work with individuals to offer an insight into lenders’ assessment criteria for loans as well as helping to work with lenders to negotiate the terms of your existing debts.

Look at alternative lending options

Just because you have been refused a loan with one lender, this doesn’t necessarily mean this will be true of all lenders. There are also loans that are specifically designed for those with bad credit, or lenders that will consider those with a poor credit history. As an example the range of short term loan options offered by Loan My Motor are open to those who may have a less than pristine credit history. However, it is important to assess whether you are able to meet repayments when taking out this kind of loan.

Another secured lending option, involves borrowing against your home. If you already have a mortgage in place you may be able to increase your loan amount, but it is important to be aware that you could risk repossession if you fail to keep up with repayments.

Ultimately, there are many steps that can be taken to turn a bad credit history into a good one, with plenty of lending options available along the way.